- Information Center
- Investment News
According to Yonhap News,
SEOUL, March 17 (Yonhap) -- South Korea will announce a set of measures on Wednesday to stabilize financial markets rattled by the new coronavirus outbreak, the country's chief economic policymaker said Tuesday.
Speaking to a parliamentary session, Finance Minister Hong Nam-ki said the government will unveil new steps to address market turmoil, including the readjustment of the cap on domestic banks' foreign currency forward positions.
"(The ministry) is reviewing various measures to stabilize the financial markets, including a limit in currency forward (positions) as suggested by the market," the minister said. The measures will be unveiled at a meeting of economy-related ministers on Wednesday, he added. The minister warned that financial markets could be subject to more instability due to investors' growing risk-averse tendency.
"The stability of the stock and bond markets are growingly under the influence of volatility linked to the outflow of foreign funds," Hong said. "There's the possibility of financial market instabilities due to a growing trend for risk aversion," he said. The minister suggested that the local currency market is capable of riding out a shock thanks to "a long-accumulated foreign exchange reserves."
He said the government is working to forge a currency swap agreement with the U.S. "A currency swap (deal) between South Korea and the U.S. would serve as a reliable safety net ... as in a similar deal in 2008, the government is internally working to make it happen (once more)," according to Hong.
The country's stock market has been suffering an extended rout, sliding for five consecutive days, and the local currency continued to lose ground against the U.S. dollar amid increased risk-off sentiment, as abysmal investor sentiment failed to improve despite a set of drastic monetary easing policies around the globe.
The benchmark Korea Composite Stock Price Index (KOSPI) surrendered 42.42 points, or 2.47 percent, to close at 1,672.44 on Tuesday, the lowest closing since Oct. 5, 2011, when the corresponding figure was 1,666.52 points.
The Korean won closed at the lowest point against the American dollar in 10 years as demand for the greenback increased amid foreign sell-offs. Foreigners have been net sellers since March 5, having offloaded a total of 7.43 trillion won (US$6 billion). They sold a net 1.31 trillion won on March 9, the largest daily total on record.
Last week, the country announced a six-month ban on stock short selling in an effort to help improve market sentiment. The measures took effect starting on Monday. The temporary ban marks the third of its kind in South Korea. The country last prohibited short selling in 2011.
The finance minister said it is currently not the time to discuss a second round of extra budget.
The National Assembly is set to approve an 11.7 trillion-won extra budget bill later in the day, supporting the government's move to strengthen quarantine measures and minimize the economic fallout from the new coronavirus.
Copyrights Yonhap News. All Rights Reserved.
Reprint or redistribution without permission is prohibited.
Source: Yonhap News (Mar. 17 , 2020)